The traditional paper car tax disc will be replaced by an electronic system in
October, and drivers are being urged to understand the rules

The tax disc, which was first introduced in 1921, will cease to exist in paper form from October 1, with a new electronic system being put in its place.

Under new rules announced in the Autumn Statement last year, motorists will now have to register their car online to pay Vehicle Excise Duty, otherwise known as road tax. This can be done via Direct Debit on the Driver and Vehicle Licensing Agency (DVLA) website, on the phone, or at a Post Office branch.

Those who don't register for the tax, will be caught out by number plate recognition cameras which track each vehicle on the road.

While the move aims to streamline services and, it is claimed, save British businesses millions of pounds a year in administrative costs, motorists are being warned to brush up on the new rules or face possible fines.

Anyone who buys a used car will no longer benefit if there are months left on the tax disc, as the vehicle tax will no longer be transferred with the car. This means buyers will have to renew their tax disc straight away, or risk being caught out on the road in an untaxed car.

The seller of the vehicle is responsible for informing the DVLA of a change of ownership, otherwise they could face a possible £1,000 fine. This can be done by filling out a V5C form and sending it to the DVLA.

Vehicle sellers will get an automatic refund for any full calendar months left on the vehicle tax.

Paul Watters, head of roads policy at the AA, said: "This is a huge change and vehicle owners and drivers need to be aware of the rules. A driver, not registered owner, can be issued a non-endorsable fixed penalty for driving an untaxed car. An owner can be fined £80 for using an untaxed vehicle (one not registered off the road) and can be charged any back tax."

Mr Watters said it was important all vehicle owners and motorists did their utmost to establish whether their vehicle was taxed or SORN’d (declared off the road) before driving the car. This can be done here.

Julie Daniels, head of motor at comparethemarket.com, said that the removal of the tax disc, which will in turn eliminate tax dodgers from the road, "should have a positive impact on premiums".

The paper element of the driving licence, which accompanies the credit card size photo-card, is also due to be axed in January 2015.